Corporate Governance and Jane Diplock AO 15 August 2008 Securities - - PDF document

Jane Diplock AO Corporate Governance and Securities Law 15 August 2008

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Introduction

• High standards of corporate governance instill

fid i i t confidence in investors

• Securities Commission’s role to strengthen

Securities Commission s role to strengthen confidence in capital markets Fi i l k t t l l b l

• Financial markets are now truly global
• Globalization means it is vital we understand

Globalization means it is vital we understand diverse treatments of corporate governance around the world

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around the world

Three key themes for CG

• Conceptual convergence with implementation

diff differences

• Effective benchmarks exist around the world

Effective benchmarks exist around the world

• Benchmarking & recognizing equivalence will

f ilit t t l iti facilitate mutual recognition

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Increasing convergence in CG

• Increasing scope to recognize equivalence in

frameworks of others frameworks of others

• Expect implementation differences

p p

• Key elements of corporate governance:

i t it d t di f l & ibiliti – integrity, understanding of roles & responsibilities, honesty & fairness, transparency

• Manifest in various ways across jurisdictions:

rules-based and principles-based

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Differing approaches

• Differing approaches reflected in different

l i l ti i i d t t legislative provisions and structures

• Differences in NZ’s Companies Act and

p Australia’s Corporations Act insufficient to undermine confidence in the regulatory regime

• f the other

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Differing approaches (cont’d)

• Development of legislation and regulation often

th d t f ti l hi t d k t the product of particular history and market conditions-

– eg Sarbanes-Oxley

• Important to understand divergent histories and

Important to understand divergent histories and circumstances when building regulatory cooperation cooperation

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Effective Benchmarks

• Benchmarks exist for recognition of equivalence

– statutes, codes, principles , , p p

• Examples:

OECD P i i l f C t G – OECD Principles of Corporate Governance – Commission’s Principles and Guidelines 2004

• Commission agrees with international research:

– failure of corporate governance contributes to p g corporate failure – many examples of poor governance in failed finance

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companies

Regulatory cooperation

• Recognizing equivalence facilitates regulatory

cooperation

• IOSCO – International standards setter for

securities regulation g

• Vision

– markets operate across the world on sound principles – markets operate across the world on sound principles & standards – regulators cooperate & exchange information across g p g borders to enforce securities law

• Members are regulators from 109 jurisdictions,

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g j , & regulate 90% of world’s capital markets

IOSCO (cont’d)

• Aims for IOSCO Principles to be implemented in

member jurisdictions member jurisdictions

– to raise level & consistency of regulation worldwide

• IOSCO MMOU enables cooperation & exchange
• f information for enforcement
• IOSCO Principles & MMOU – foundations for

regulatory cooperation globally regulatory cooperation globally

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Convergence – IFRS

• International Financial Accounting Standards

(IFRS) ll t l f (IFRS) excellent example of convergence

• Vision is for a single worldwide set of accounting

Vision is for a single worldwide set of accounting standards I ill b fi f hi h l l f

• Investors will benefit from a high level of

comparability and consistency

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Mutual Recognition

• Does not require adoption of identical standards
• Allows domestic laws and regulations to reflect

national imperatives national imperatives

• Provides capacity for cross-border cooperation

and enforcement

• Common basis of principles for assessing
• Common basis of principles for assessing

effectiveness essential

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Examples p

• US SEC is developing MR arrangements with:

Australia, Canada, EU

• NZ & Australia – mutual recognition of securities
• NZ & Australia – mutual recognition of securities
• fferings
• Voluntary opt-in scheme for collective investment

schemes in Asia-Pacific

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Requirements for Mutual Recognition q g

• Trust in the capacity and willingness of the other

p y g regulator to enforce and cooperate will be key IOSCO 30 Principles & MMOU provide a

• IOSCO 30 Principles & MMOU provide a

foundation for assessing equivalence

• Calibration of other jurisdiction’s corporate

governance framework important g p

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A vision

• A mutually recognised network of multilateral

and bilateral frameworks around the world and bilateral frameworks around the world

• Recognition of equivalence in corporate

g q p governance will be essential

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Conclusion

• Good corporate governance around the world

– based on globally accepted benchmarks, which are effectively enforced l d i h i f i i i l – coupled with a practice of recognizing equivalence between jurisdictions f d t l l i th th d d l t f – fundamental role in the growth and development of

• ur capital markets

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Thank you

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